Governor secures 1115 waiver to overhaul - not expand - Medicaid

How to apply

Who is eligible

Children up to 141% of FPL; children up to 312% of FPL qualify for CHIP; pregnant women up to 141% of FPL; parents up to 13% of FPL; elderly and disabled individuals with certain medical conditions and income levels

If you’re a low-income adult, it is tough to qualify for Medicaid in Alabama. If you don’t have dependent children, you’re simply not eligible given that Governor Bentley and the legislature have thus far rejected the Affordable Care Act’s Medicaid expansion. If you do have children, you may qualify if your income is very low.

Although critics of the ACA’s Medicaid expansion often contend that expansion incentivizes people to not work, a 2015 Families USA analysis found that the percentage of uninsured working adults has dropped significantly more in states that expanded Medicaid. In states that expanded Medicaid in 2014, there was a 25 percent reduction in the number of working adults who were uninsured. But in Alabama, there was just a 12 percent reduction in the percentage of working uninsured adults in 2014.

Democratic State Senator William Beasley introduced SB182 in February 2016, calling for straightforward Medicaid expansion as outlined in the ACA. But not surprisingly, the bill did not advance out of committee.

Funding from BP oil spill settlement

Although no real progress has been made towards Medicaid expansion, Alabama’s existing Medicaid program had been facing an $85 million shortfall in the state’s 2016 budget. Governor Bentley called a special session of the legislature in August 2016 to address the issue; lawmakers were considering a state lottery or the possibility of using money from the BP oil spill settlement to shore up Medicaid funding.

Ultimately, lawmakers settled on funneling $120 million of state’s $1 billion BP settlement to the Medicaid program over the next two years, solving the problem in the short-term. But there’s still a long-term problem, as the funding solution only lasts for two years.

Medicaid overhaul – but still no expansion

In May 2014, Alabama submitted a Section 1115 demonstration waiver proposal to CMS, called Alabama Medicaid Transformation. The proposal calls for Medicaid funds to be distributed on a per-patient basis to regional care organizations (RCOs), most of which would be affiliated with local hospitals. The concept is that the RCOs will use preventive care and early (ie, lower-cost) interventions to keep patients out of the hospital. RCOs that spend less than their per-patient allocation would keep the leftover funds, while those that spend more would have to cover the excess cost themselves.

In February 2016, CMS approved Alabama’s section 1115 waiver, and the federal government will contribute $328 million over three years to fund the transformation process, with the potential to secure another $470 million to supplement payments to RCOs (Alabama had asked for a total of $1 billion to fund Medicaid transformation). Some conditions of the approval include a requirement that the RCO model not cost the federal government any more than the current fee-for-service Medicaid program, along with a requirement that children and pregnant women receive more check-ups, and that Medicaid beneficiaries experience fewer hospitalizations.

Although Medicaid managed care is used in the majority of the states, the typical model involves the state contracting with a private health insurance company, and the insurance company paying the healthcare providers. Alabama’s proposal calls for cutting out the insurance carriers and having the state contract directly with the provider-based RCOs.

Since Alabama has not expanded Medicaid, the population impacted by the new 1115 waiver is mostly pregnant women, children, disabled individuals, and nursing home patients.

Governor considering expansion, but funding an obstacle

The task force recommended that Bentley and the Legislature “move forward at the earliest opportunity to close Alabama’s health coverage gap with an Alabama-driven solution.” They noted that expanding Medicaid would make coverage newly-available to 185,000 low-income residents in the state, and would greatly improve their access to healthcare (note that other estimates have put the number higher than this).

The majority of those 185,000 people currently have no realistic access to coverage at all; Kaiser Family Foundation data indicates that 139,000 people are in the coverage gap in Alabama. They aren’t eligible for Medicaid because the state has not yet accepted federal funding to expand Medicaid. And they also aren’t eligible for premium subsidies in the exchange, since those aren’t available to people with incomes below the poverty level (as the ACA was written, Medicaid would have been available to them instead, but a Supreme Court ruling in 2012 allowed states to opt out of Medicaid expansion; those that did have created the coverage gap).

The week before the task force officially recommended Medicaid expansion, Bentley had said that Alabama is “looking at” the possibility of expanding Medicaid, but he noted that it would be an uphill battle to obtain the funding needed without a tax hike (the legislature isn’t likely to approve a significant tax increase for anything, including Medicaid expansion). One of the possibilities that the task force has considered is a 75 cent/pack tobacco tax to help fund Medicaid expansion.

So although Alabama may be closer to Medicaid expansion than some other hold-out states, there is still a long way to go. And Bentley appears to be focused on implementing the RCO transformation rather than working to expand Medicaid at the same time. Even if lawmakers were to agree to a solution, it would almost certainly be in the form of another Section 1115 waiver (the “Alabama-driven solution” that the task force mentioned is a reference to the fact that a state can use a waiver to implement Medicaid expansion with aspects that are unique to the state). The waiver would have to then be approved by CMS before it could be implemented.

Governor’s change of heart?

Medicaid expansion was a point of differentiation in the November 2014 governor’s race. Challenger Parker Giffith criticized Gov. Robert Bentley for his opposition to expansion, while Bentley repeatedly reaffirmed his decision during the campaign and immediately following his re-election.

However, by late December of 2014, Bentley said he’d be open to a block grant or some other form of federal Medicaid funding to expand health coverage in the state.

In 2013, a health care economist from the University of Alabama evaluated the impact of not implementing Medicaid. As summarized in the Birmingham Business Journal, the evaluation shows the state spending an estimated $771 on Medicaid expansion between 2014 and 2020.

In July 2015, a new report from the University of Alabama at Birmingham School of Public Health estimated that the state’s portion of the Medicaid expansion costs would be about $222 million a year, starting in 2020 once the state is responsible for 10 percent of the cost. Under the state’s current Medicaid funding model, 33 percent of that would come from the General Fund (about $73 million a year).

However, that is dwarfed by the estimated $12 billion in Federal funding that Alabama would receive between 2014 and 2020 if they expanded Medicaid (given that Medicaid expansion in the state now couldn’t take effect until at least 2017, the total amount of federal funding through 2020 is lower than $12 billion by this point). Through a ripple effect, the total economic impact could be up to $20 billion and create up to 52,000 jobs.

Eligibility guidelines

To qualify for federal Medicaid funding, states are required to cover low-income children, pregnant women, parents of minor children, elderly people, and people with disabilities. Coverage for additional groups is optional, with the state receiving additional funding for the groups it elect to include in its program.

The federal government sets baseline eligibility levels, which states can adjust upwards. The income limits vary widely by category and by state.

Enrollment resources

Paper forms can be completed and submitted by mail, fax or in person to a district office.

For assistance by phone, call toll-free: 1-800-362-1504.

History of Medicaid in Alabama

The federal legislation establishing Medicaid was signed into law in 1965. Former Gov. Lurleen B. Wallace established Alabama’s Medicaid program by executive order in June 1967, and operations began Jan. 1, 1970. As of the program’s start date, 253,991 Alabama residents qualified for Medicaid. By the end of 1970, eligibility increased to more than 313,000 people, and the agency employed 45 people. A detailed history is available on the Alabama Medicaid website.

As of late 2013, just prior to the launch of the health insurance marketplaces, Alabama Medicaid covered about 799,000 people. As of July 2016, Medicaid enrollment in the state stood at 885,046, an 11 percent increase since 2013.

Nearly all states, including Alabama, contract with managed care organizations to deliver some or all Medicaid benefits. About 61 percent of Alabama’s Medicaid beneficiaries were enrolled in managed care plans as of 2014 according to the Kaiser Family Foundation. The new Section 1115 waiver to transform Alabama’s Medicaid program calls for cutting out private health insurers and contracting directly with regional care organizations – mostly run by hospitals – instead.

In August 2015, Governor Bentley cut off Medicaid’s reimbursement arrangement with Planned Parenthood, following a series of undercover videos created by anti-abortion groups alleging that Planned Parenthood was selling fetal tissue. Over the previous two years, Alabama Medicaid had paid Planned Parenthood less than $5,000; all of it was for office visits and contraceptives – no Medicaid funds had been used for abortion. Planned Parenthood sued the state over the termination of reimbursements, and ultimately won. By December 2015, Planned Parenthood was once again on the state’s Medicaid provider list, and the state had been ordered to pay Planned Parenthood’s $51,000 in legal fees.

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